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Diversified company Exxaro Resources expects heightened European interest in South African thermal coal to continue well into next year as Europe continues to seek independence from Russian energy sources.
Moreoever, South African thermal coal exports into markets for high-calorific coal, such as South Korea and Japan, present additional opportunities in the year ahead, the company said in a December 1 preclose update for the financial year ending December 31.
Exxaro said the anticipated global gas trade flows and market prices, after the European winter months have passed, are expected to remain supportive of seaborne thermal coal demand and prices, while stronger demand from the Pacific is expected as South African coal continues to trade at a discount to Australian coal.
Supply tightness and higher prices in the seaborne thermal coal markets have spilled over into the South African domestic market, which Exxaro expects will support domestic prices into the new year.
“The domestic market demand for both sized and unsized product remains strong despite declines in export pricing. Although pricing has held up relative to the export market, indications of pricing pressures are observed for products destined for export,” the company said.
Consequently, domestic market participants are experiencing a margin “squeeze” when trucking coal to alternative ports, as export prices are declining.
IRON-ORE OUTLOOK
In terms of the iron-ore market, Exxaro has predicted a relatively flat global steel production level for the coming year.
“Higher iron-ore supply, together with an expected steady demand, is likely to see seaborne prices testing cost curve support levels,” Exxaro said.
However, the company noted that the net outcome between key market opportunities from higher steel production in China and the risk of seaborne supply once again falling short of expectations would determine price levels for 2023.
OPERATIONAL PERFORMANCE OUTLOOK
Given ongoing challenges with respect to rail performance, Exxaro said it would continue to respond with its market-to-resource optimisation strategy, ensuring continued operations and a diversified export flow by trucking coal to alternative ports.
“We continue evaluating alternative logistical options to evacuate our product.
Operational excellence and digital programmes are, among others, our greatest defences during the current unprecedented value chain disruptions and challenges, ensuring we remain cost competitive,” the company said.